Sony Corporation is one of the best-known names in consumer electronics and ranks second worldwide in electronics behind Matsushita Electric Corporation. Since it was established shortly after World War II, Sony has introduced a stream of revolutionary products, including the transistor radio, the Trinitron television, the Betamax VCR, the CD player, the Walkman portable cassette player, and the PlayStation game

console. The company’s electronics segment—which includes audio and video products, televisions, personal computers, monitors, computer peripherals, telecommunications devices, and electronic components (such as semiconductors)— generates about two-thirds of the overall revenues. Sales of game consoles and software account for about 9 percent of revenues. Another 10 percent of revenues are derived from Sony’s music businesses, which include the Columbia and Epic record labels. About 7 percent of revenues come from Sony’s motion picture and television business, which includes the Columbia TriStar studio. Sony’s other major business segment is insurance, from which about 6 percent of revenues originate.

Early History: From Tape Recorders to Transistor Radios to the Trinitron

Sony was founded by a former naval lieutenant named Akio Morita and a defense contractor named Masaru Ibuka. Morita, a weapons researcher, first met Ibuka during World War II while developing a heat-seeking missile-guidance system and a night-vision gun scope. After the war Ibuka worked as a radio repairman for a bomb-damaged Tokyo department store. Morita found him again when he read in a newspaper that Ibuka had invented a shortwave converter. In May 1946 the two men established a partnership with $500 in borrowed capital, and registered their company as the Tokyo Tsushin Kogyo Kabushiki Kaisha (Tokyo Telecommunications Engineering Corporation, or TTK). Morita and Ibuka moved their company to a crude facility on a hill in southern Tokyo where they developed their first consumer product: a rice cooker, which failed commercially. In its first year TTK registered a profit of $300 on sales of less than $7,000.

But as the Japanese economy grew stronger, demand for consumer goods increased. Morita and Ibuka abandoned the home-appliance market and, with injections of capital from Morita’s father, concentrated on developing new electronic goods. Ibuka developed a tape recorder fashioned after an American model he had seen at the Japan Broadcasting Corporation. Demand for the machine, which was introduced in 1950 and was the first Japanese tape recorder, remained low until Ibuka accidentally discovered a U.S. military booklet titled
Nine Hundred and Ninety-Nine Uses of the Tape Recorder. Translated into Japanese, the booklet became an effective marketing tool. Once acquainted with its many uses, customers such as the Academy of Art in Tokyo purchased so many tape recorders that TTK was soon forced to move to a larger building in Shinagawa.

Nono Ohga, an opera student at the academy, wrote several letters to TTK criticizing the sound quality of its recorder. Impressed by the detail and constructive tone of the criticisms, Morita invited Ohga to participate in the development of a new recorder as a consultant. Ohga accepted, and subsequent models were vastly improved.

Constantly searching for new technological advances, Masaru Ibuka heard of a tiny new capacitor called a transistor in 1952. The transistor, developed by Bell Laboratories, could be used in place of larger, less-durable vacuum tubes. Western Electric purchased the technology in order to manufacture transistorized hearing aids. Ibuka acquired a patent license from Western Electric for $25,000 with the intention of developing a small tubeless radio.

TTK began mass production of transistor radios in 1955, only a few months after they were introduced by a small American firm called Regency Electronics. The TTK radio was named Sony, from sonus, Latin for “sound.” The Sony radio had tremendous sales potential, not only in the limited Japanese market but also in the United States, where the economy was much stronger.

Traditionally, international sales by Japanese companies were conducted through trading houses such as Mitsui, Mitsubishi, and Sumitomo. Although these trading companies were well represented in the United States, Morita chose not to do business with them because they were unfamiliar with his company’s products and did not share his business philosophy. Morita traveled to New York, where he met with representatives from several large retail firms. Morita refused an order from Bulova for 100,000 radios when that company required that each carry the Bulova name. Morita pledged that his company would not manufacture products for other companies and eventually secured a number of more modest orders that assured his company’s growth at a measured pace. Another highlight of 1955 was the first listing of the company’s stock on the over-the-counter market of the Tokyo Stock Exchange.

The rising popularity of the Sony name led Morita and Ibuka to change the name of their company to Sony Kabushiki Kaisha (Corporation) in January 1958. The following year Sony announced that it had developed a transistorized television, which was introduced in 1960. That same year, after a business dispute with Delmonico International, the company Morita had appointed to handle international sales, Sony established a trade office in New York City and another in Switzerland called Sony Overseas.

A subsidiary called Sony Chemicals was created in 1962 to produce adhesives and plastics to reduce the company’s dependence on outside suppliers. In 1965 a joint venture with Tektronix was established to produce oscilloscopes in Japan.

During the early 1960s Sony engineers continued to introduce new, miniaturized products based on the transistor, including an AM/FM radio and a videotape recorder. By 1968 Sony engineers had developed new color-television technology. Using one electron gun, for more accurate beam alignment, and one lens, for better focus, the Sony Trinitron produced a clearer image than conventional three-gun, three-lens sets. In what has been described as its biggest gamble, Sony, confident that technology alone would create new markets, invested a large amount of capital in the Trinitron.

Also in 1968, Sony Overseas established a trading office in England, and entered into a joint venture with CBS Inc. to produce phonograph records. The venture was under the direction of Norio Ohga, the art student who had complained about Sony’s early tape recorder, whom Morita had persuaded in 1959 to give up opera and join Sony. The company, called CBS/Sony, later became the largest record manufacturer in Japan. In 1970 Sony Overseas established a subsidiary in West Germany to handle sales in that country.

1970s: Betamax and the Walkman

After a decade of experience in videotape technology, Sony introduced the U-matic three-quarter-inch videocassette recorder (VCR) in 1971. Intended for institutions such as television stations, the U-matic received an Emmy Award for engineering excellence from the National Academy of Television Arts and Sciences. In 1973, the year Sony Overseas created a French subsidiary, the academy honored the Trinitron series with another Emmy.

Sony developed its first VCR for the consumer market, the Betamax, in 1975. The following year the Walt Disney Company and Universal Pictures filed a lawsuit against Sony, complaining that the new machine would enable widespread copyright infringement of television programs. A judgment in favor of Sony in 1979 was reversed two years later. Litigation continued, but by the time the matter reached the U.S. Supreme Court the plaintiffs’ original case had been severely undermined by the proliferation of VCRs, making any legal restriction on copying television programs for private use nearly impossible to enforce.

Company Perspectives:

Recognizing that environmental protection is one of the most pressing issues facing mankind today, Sony incorporates a sound respect for nature in all of its business activities. With this philosophy, Sony has defined environmental conservation as an important part of its management strategy. The Sony Group has created a global action plan and conducts environmental preservation programs. This program has five core components: reducing the environmental impact of business activities and production processes; designing environmentally sensitive products and promoting recycling; developing environmental technologies; promoting the environmental education and full participation of Sony employees; and disclosing environmental information to the public.

During the mid-1970s, competitors such as U.S.-based RCA and Zenith and Japanese-based Toshiba and Victor Company of
Japan (JVC) effectively adopted and improved upon technologies developed by Sony. For the first time, Sony began to lose significant market share, often in lines that it had pioneered. Strong competition, however, was only one factor that caused Sony’s sales growth to fall (after growing 166 percent between 1970 and 1974, it grew only 35 percent between 1974 and 1978).

Like many Sony officials, Akio Morita lacked formal management training. Instead, he relied on his personal persuasive skills and his unusual ability to anticipate or create markets for new products. In typical fashion, Sony introduced the Betamax VCR well before its competitors, in effect creating a market in which it would enjoy a short-term monopoly. At this stage, however, Morita failed to establish the Betamax format as the industry standard by inviting the participation of other companies.

Matsushita Electric (which owned half of JVC) developed a separate VCR format called VHS (video home system), which permitted as many as three additional hours of playing time on a tape, but which was incompatible with Sony’s Betamax. When the VHS was introduced in 1977, Morita was reported to have felt betrayed that Sony’s competitors did not adopt the Betamax format. He appealed to 81-year-old Konosuke Matsushita, in many ways a patriarch of Japanese industry, to discontinue the VHS format in favor of Betamax. When Matsushita refused, many believed it was because he felt insulted by Morita’s failure to offer earlier collaboration.

Matsushita launched a vigorous marketing campaign to convince customers and other manufacturers not only that VHS was superior, but that Betamax would soon be obsolete. The

marketing war between Matsushita and Sony was neither constructive nor profitable; both companies were forced to lower prices so much that profits were greatly depressed. Although Betamax was generally considered a technically superior product, the VHS format grew in popularity and gradually displaced Betamax as a standard format. Despite its falling market share (from 13 percent in 1982 to 5 percent in 1987), Sony refused to introduce a VHS line until the late 1980s.

In 1979 Morita personally oversaw the development of a compact cassette tape player called the Walkman. Inspired by Norio Ohga’s desire to listen to music while walking, Morita ordered the development of a small, high-fidelity tape player, to be paired with small, lightweight headphones that were already under development. The entire program took only five months from start to finish, and the product’s success is now legendary—Walkman even became the generic term for similar devices produced by Sony’s competitors.

1980s: CD Player, Video Cameras, CBS Records, Columbia Pictures

During the 1970s, Masaru Ibuka, 12 years Morita’s senior, gradually relinquished many of his duties to younger managers such as Norio Ohga, who was named president of Sony in 1982. Ohga became president shortly after a corporate reorganization that split Sony into five operating groups (marketing and sales, manufacturing, service, engineering, and diversified operations). While not formally trained in business, Ohga nonetheless understood that Sony was too dependent on an unstable consumer electronics market. In one of his first acts, he inaugurated the 50-50 program to increase sales in institutional markets from 15 to 50 percent by 1990.

During this time, Sony’s research and development budget consumed approximately 9 percent of sales (Matsushita budgeted only 4 percent). Another groundbreaking result of Sony’s commitment to research and development was a machine that used a laser to reproduce music recorded digitally on a small plastic disk. The compact disk (or CD) player, introduced by Sony in 1982, eliminated much of the noise common to conventional, analog phonograph records. Sony developed the CD in association with the Dutch electronics firm Philips, partly in an effort to ensure broad format standardization. Philips, which had developed the most advanced laser technology, was an ideal partner for Sony, which led in the pulse-code technology that made digital sound reproduction possible. Soon the CD format was adopted by competing manufacturers; by the mid-1990s it had virtually replaced phonograph systems as the recording medium of choice.

Early in the 1980s, Morita began ceding some of his duties to Sony’s president, Norio Ohga, the young opera student hired 30 years earlier to improve Sony’s tape recorders. Under Ohga, Sony entered into a new acquisitions phase with the intent of protecting itself from the costly mistake it had made with Betamax. One example of the changes Ohga brought about was Sony’s video camera, introduced in 1985. Lighter, less expensive, and more portable than VHS cameras, the camera used 8mm videotape, and was incompatible with both Betamax and VHS machines. The key difference between this and earlier Sony products was that Sony developed the new 8mm video format in conjunction with over 100 competitors. While the
camera may have been incompatible with the older Betamax and VHS technologies, Sony ensured that it would be compatible with the next generation of video cameras. Within three years of its introduction, the camera captured over 50 percent of the European, 30 percent of the Japanese, and 20 percent of the North American markets.

In May 1984 Sony purchased Apple Computer’s hard-disk-technology operations. As a result of this acquisition, Sony was able to control about 20 percent of the Japanese market for workstations, personal computers used in business offices, thus helping to increase the proportion of its sales derived from institutional customers. Ohga also broke a decades-old tradition in 1984 when he established a division to manufacture and market electronics components for other companies. By 1988, fueled by strong sales of semiconductors (once manufactured only for Sony products), the components division had grown to represent about 11 percent of Sony’s total sales.

Sony also sought to gain control of the software end of the electronics/entertainment industry. On November 29, 1985 the Sony Corporation of America, which operated several assembly plants in the United States, purchased the Digital Audio Disk Corporation from its affiliate CBS/Sony. Two years later, Sony purchased CBS Records for $2 billion. CBS Records, whose labels included Epic and Columbia, was during this time the largest producer of records and tapes in the world.

Sony had learned through its Betamax experience that a superior product alone would not ensure market dominance; had Sony been able to flood the market with exclusively Beta-formatted movies, the VCR battle might have turned out differently. Looking toward the future development of audio equipment, including digital audio tape (DAT), Sony bought the record manufacturer with an eye toward guaranteeing that the products it manufactured to play music would remain compatible with the medium used to record music. The acquisition marked less of a diversification for Sony than an evolution toward dominance in a specific market.

Sony sought further diversification in U.S. entertainment companies. In 1988, the company considered an acquisition of MGM/UA Communications Company, but decided the price was too high. Then in 1989 Sony made headlines around the world when it bought Columbia Pictures Entertainment, Inc. from Coca-Cola for $3.4 billion. Columbia provided Sony with an extensive film library and a strong U.S. distribution system. It also carried $1 billion in debt, which almost tripled Sony’s short-term debt to around ¥8 billion. Industry analysts applauded the move; when a recession hit the film industry shortly after Sony’s purchase, however, some began to question Sony’s ability to deliver its traditionally strong profits.

1990s and Beyond: PlayStation, VAIO, and the Networked Future

Sony did deliver, however, posting record earnings in 1990 of ¥58.2 billion ($384 million), a 38.5 percent increase over 1989. In 1992, Columbia Pictures and its subsidiary TriStar jointly captured 20 percent of the U.S. market share, far above the shares held by competing studios. By this time the entertainment operation had been renamed Sony Pictures Entertainment, Inc.

The complexities of operating a truly multinational corporation, however, began taking their toll on Sony. Most of the world’s largest economies (Europe, Japan, and the United States) were experiencing a slowdown in the early 1990s. This factor created what Sony called “an unprecedentedly challenging operating environment.” Although sales in most of Sony’s businesses increased in 1992, operating income dropped 44 percent to ¥166 billion ($1.2 billion). Net income increased slightly to ¥120 billion.

The ongoing appreciation of the yen against most major currencies had an even more adverse effect on Sony’s bottom line in 1993: net income fell a dramatic 70 percent to ¥36 billion ($313 million) on sales of ¥3.99 trillion ($34.4 billion). Had the yen’s value held steady at 1992 figures, Sony’s net income would have totaled about ¥190 billion ($1.3 billion).

During that year, Ohga assumed the duties of chief executive in addition to his role as president. He and Morita responded to Sony’s tough economic situation by bolstering marketing, reducing inventory levels, streamlining operations, and keeping a watchful control of capital investments. The company also embarked on an extensive reorganization effort with the goal of decentralizing operations and reducing unnecessary management. Despite these measures, Sony was unable to stem the slide. Net income plummeted another 50 percent in 1994 to ¥15 billion, on sales of ¥3.73 trillion.

By this time Morita had relinquished virtually all his duties in the company, having suffered a stroke in late 1993. In Sony’s 1994 annual report, his picture and signature were conspicuously absent from the letter to shareholders, implicitly announcing Ohga’s new leadership position. Under Morita’s leadership, Sony’s rise to preeminence in the world consumer electronics market was almost entirely self-achieved; Sony outperformed not only its Japanese rivals, among them associates of the former zaibatsu (conglomerate) companies, but also larger American firms, which by 1995 had all but abandoned the consumer electronics market.

In the late 1980s Morita told Business Week that he regarded Sony Corporation as a “venture business” for the Morita family, which had produced several generations of mayors and whose primary business remained the 300-year-old Morita & Company. Under the direction of Akio Morita’s younger brother Kuzuaki, Morita & Company produced sake, soy sauce, and Ninohimatsu brand rice wine in Nagoya. The company, whose initial $500 investment in TTK was worth $430 million in 1995, owned a 9.4 percent share of Sony.

In April 1995, Ohga ascended to the chairmanship of Sony, and Morita was made an honorary chairman. The company’s new president was Nobuyuki Idei, a 34-year veteran of the company, who had founded Sony’s French subsidiary in 1970 and had since played a role in many of the company’s major accomplishments, including audio CD technology, computer workstations, and the 8mm video camcorder.

Sony’s success had been a direct result of the wisdom of its founders, who had the talent to anticipate the demands of consumers and to develop products to meet those demands; Idei’s presidency, some suggested, signaled a new era for the company.

Immediate among Idei’s concerns were helping Sony become an integral player in the information highway industry. He also hoped to help the company establish an industry standard for DVDs, or digital videodisks, CD-like disks capable of holding full-length films for play on television screens via players. Once again, Sony had teamed up with Philips to develop a DVD format, but the partners quickly discovered they were facing a rival format developed by Toshiba and Time Warner. This rival format quickly gained the support of a number of the world’s consumer electronics powerhouses. Rather than face a replay of the bloody battle between the Betamax and VHS formats, Sony and Philips in late 1995 agreed to support the DVD format developed by Toshiba and Time Warner. Sony subsequently introduced its first DVD player in March 1997.

Meanwhile, Sony unexpectedly entered the video game market in the mid-1990s, making an immediate splash. The development of the Sony PlayStation had actually begun in the late 1980s as a joint project with game giant Nintendo Co., Ltd. Nintendo had agreed to help develop a new game console that would combine the graphic capabilities of a computer workstation with Sony’s CD-ROM drive, but then pulled out of the project in 1992. Sony decided to develop the new machine solo, introducing the 32-bit PlayStation to the Japanese market in 1994 and the U.S. market one year later. It was an immediate and huge success, in part because of the hundreds of software titles that were quickly available for the console thanks to Sony’s ability to entice top Japanese and U.S. developers to create games for the PlayStation. By 1998, the PlayStation had grabbed about 40 percent of the worldwide game market, and Sony’s game unit, Sony Computer Entertainment, accounted for 10 percent of the company’s worldwide revenue and a whopping 22.5 percent of its operating income.

Unfortunately, the mid-1990s were also marked by continued problems at Sony Pictures Entertainment. Top management at the motion picture arm spent hundreds of millions of dollars on a string of flops, such as Last Action Hero and Geronimo, in addition to spending lavishly on hiring, studio renovations, and other expenses. Sony ended up taking a $3.2 billion write-off— one of the largest ever by a Japanese company—related to the entertainment unit during the fiscal year ending in March 1995; consequently, the company posted a net loss for the year of $2.8 billion (on sales of $44.76 billion). A major management shakeup occurred as well.

As Sony attempted to turn around its motion picture unit, in electronics the company surprised many observers by entering the crowded and low-margin personal computer business in 1997. That year, through a partnership with Intel, Sony began selling its VAIO line of PCs. Including both desktop and notebook models, the line received plaudits for its quality but got off to a slow start in the United States thanks to its above-average price tags. Sony designed the VAIO computers specifically for the home market, and they sported unique features that made them particularly well-suited to consumers who owned other Sony products. For example, software and ports were included to allow owners of Sony camcorders to transfer their home videos to the VAIO PC and to edit and manipulate the videos in a variety of ways. Sony also continued to stay on the cutting edge in the venerable television field, introducing its first flatscreen TV in 1996 and its first digital, high-definition model two years later. Also in 1998 came the launch of AIBO, a robot dog, which was touted as having the capability of expressing emotions and learning.

During 1999, a year that saw the passing of company co-founder Morita (the other founder, Ibuka, died in 1997), Idei launched a sweeping reorganization to position the company for the future—in Sony’s vision, “the network era of the 21st century.” In March 1999 Sony announced that it planned to cut its workforce by 10 percent and its manufacturing capacity by one-third before 2003. The cutbacks were slated for areas where growth had been slowing: analog televisions, VCRs, and Walkmans. The company planned to increase the amount of resources committed to such hot areas as digital products and the PlayStation, as well as placing increased emphasis on developing software, hardware, and services for the new networks that were beginning to emerge at the end of the 20th century—home networks, broadband networks, wireless networks. For Idei, the key for Sony was a historic shift in focus: hardware had traditionally driven product development, but Idei instead wanted software development and services to drive hardware design.

Perhaps the first example of such an approach came with the 2000 introduction of the Sony PlayStation 2. Although it was a technical marvel featuring high-end 3-D graphics and more processing power than most desktop PCs, the 128-bit PlayStation 2 was much more than a souped-up version of the original. It was of course designed for game software but it was not just a game console, having been conceived as a home entertainment center. Its DVD drive not only played game software but also audio CDs and DVD movies. It had the capability of connecting to the Internet and as such could be used as a broadband device controlling an Internet-connected home network. Despite manufacturing difficulties that limited production during the first year, the PlayStation 2 had a stellar debut, with about nine million units sold in the first 12 months. The high costs associated with developing and manufacturing the machines, however, depressed profits at Sony for the 2001 fiscal year. Also in the wake of its debut came rival Sega’s exit from the game console business in favor of concentrating on developing game titles for other companies’ machines, including the PlayStation 2. Sony continued to face competition in the game field from Nintendo, which planned to release a new machine in the fall of 2001, and faced the prospect of a new competitor, Microsoft Corporation, which was also planning a fall 2001 release of its XBox machine.

In June 2000 Idei was named chairman and CEO of Sony, while Kunitake Ando, who had headed the VAIO unit, was named president and COO. Rounding out the new management team was Teruhisa Tokunaka, a former head of the PlayStation unit, who was named deputy president and CFO. The new team faced a myriad of challenges in the rapidly changing high-tech world of the early 21st century. One example was in Sony’s music business, which was being rocked by the industry-wide threat of the rampant and unauthorized downloading of digital music files over the Internet. Sony joined other music giants in suing Napster, the most obvious threat to their hegemony. The company also entered into a joint venture with Vivendi Universal S.A. to develop an online subscription service that would allow music downloads through what was called a “virtual
jukebox.” Such a service was part of a new push by Sony into broadband delivery of the audio and video material owned by its content arms. With its aggressive moves in the areas of games, networking, and delivery of digital content, Sony was almost certain to remain a frontrunner in the ever broadening field of consumer electronics and related platforms and services.

The Sony Corporation is one of the best–known names in consumer electronics. Since it was established shortly after World War II, Sony has introduced a stream of revolutionary products, including the transistor radio, the Trinitron television, the Beta–max VCR, and the Walkman portable cassette player.

Sony maintains a number of joint ventures, including one with Union Carbide to manufacture Eveready batteries in Japan. The company also operates a life–insurance company in association with the Prudential Life Insurance Company and, with PepsiCo, runs a company that imports and markets Wilson sports equipment. Sony has also established a joint venture with the Chinese government to produce television sets in the People’s Republic of China.

Sony was founded by a former naval lieutenant named Akio Morita and a defense contractor named Masaru Ibuka. Morita, a weapons researcher, first met Ibuka during World War II while developing a heat–seeking missile–guidance system and a night–vision gun scope. After the war Ibuka worked as a radio repairman for a bomb–damaged Tokyo department store. Morita found him again when he read in a newspaper that Ibuka had invented a shortwave converter. In May of 1946 the two men established a partnership with $500 in borrowed capital, and registered their company as the Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering Corporation, or TTK). Morita and Ibuka moved their company to a crude facility on a hill in southern Tokyo where they developed its first consumer product: a rice cooker which failed commercially. In its first year TTK registered a profit of $300 on sales of less than $7,000.

But as the Japanese economy grew stronger, demand for consumer goods increased. Morita and Ibuka abandoned the home–appliance market and, with injections of capital from Morita’s father, concentrated on developing new electronic goods. Ibuka developed a tape recorder fashioned after an American model he had seen at the Japan Broadcasting Corporation. Demand for the machine remained low until Ibuka accidentally discovered a U.S. military booklet titled Nine Hundred and Ninety–Nine Uses of the Tape Recorder. Translated into Japanese, the booklet became an effective marketing tool. Once acquainted with its many uses, customers such as the Academy of Art in Tokyo purchased so many tape recorders that TTK was soon forced to move to a larger building in Shinagawa.

Norio Ohga, an opera student at the academy, wrote several letters to TTK criticizing the sound quality of its recorder. Impressed by the detail and constructive tone of the criticisms, Morita invited Ohga to participate in the development of a new recorder as a consultant. Ohga accepted, and subsequent models were vastly improved.

Constantly searching for new technological advances, Masaru Ibuka heard of a tiny new capacitor called a transistor in 1952. The transistor, developed by Bell Laboratories, could be used in place of larger, less–durable vacuum tubes. Western Electric purchased the technology in order to manufacture transistorized hearing aids. Ibuka acquired a patent license from Western Electric for $25,000 with the intention of developing a small tubeless radio.

TTK began mass production of transistor radios in 1954, only a few months after they were introduced by a small American firm called Regency Electronics. The TTK radio was named Sony, from sonus, Latin for “sound.” The Sony radio had tremendous sales potential, not only in the limited Japanese market, but also in the United States, where the economy was much stronger.

Traditionally, international sales by Japanese companies were conducted through trading houses such as Mitsui, Mitsubishi, and Sumitomo. Although these trading companies were well represented in the United States, Morita chose not to do business with them because they were unfamiliar with his company’s products and did not share his business philosophy. Morita traveled to New York, where he met with representatives from several large retail firms. Morita refused an order from Bulova for 100,000 radios when that company required that each carry the Bulova name. Morita pledged that his company would not manufacture products for other companies and eventually secured a number of more modest orders that assured his company’s growth at a measured pace.

The rising popularity of the Sony name led Morita and Ibuka to change the name of their company to Sony Kabushiki Kaisha (Corporation) in January of 1958. The following year Sony announced that it had developed a transistorized television. In 1960, after a business dispute with Delmonico International, the company Morita had appointed to handle international sales,
Sony established a trade office in New York City and another in Switzerland called Sony Overseas.

A subsidiary called Sony Chemicals was created in 1962 to produce adhesives and plastics to reduce the company’s dependence on outside suppliers. And in 1965 a joint venture with Tektronix was established to produce oscilloscopes in Japan.

During the early 1960s Sony engineers continued to introduce new, miniaturized products based on the transistor, including an AM/FM radio and a videotape recorder. By 1968 Sony engineers had developed new color–television technology. Using one electron gun, for more–accurate beam alignment, and one lens, for better focus, the Sony Trinitron produced a clearer image than conventional three–gun, three–lens sets. In what has been described as its biggest gamble, Sony, confident that technology alone would create new markets, invested a large amount of capital in the Trinitron.

Also in 1968, Sony Overseas established a trading office in England, and entered into a joint venture with CBS to produce phonograph records. The venture was under the direction of Norio Ohga, the art student who had complained about Sony’s early tape recorder, whom Morita had persuaded in 1959 to give up opera and join Sony. The company, called CBS/Sony, later became the largest record manufacturer in Japan. In 1970 Sony Overseas established a subsidiary in West Germany to handle sales in that country.

After a decade of experience in videotape technology, Sony introduced the U–matic three–quarter–inch video–cassette recorder (VCR) in 1971. Intended for institutions such as television stations, the U–matic received an Emmy Award for engineering excellence from the National Academy of Television Arts and Sciences. In 1973, the year Sony Overseas created a French subsidiary, the academy honored the Trinitron series with another Emmy.

Sony developed its first VCR for the consumer market, the Betamax, in 1975. The following year the Walt Disney Company and Universal Pictures filed a lawsuit against Sony, complaining that the new machine would enable widespread copyright infringement of television programs. A judgment in favor of Sony in 1979 was reversed two years later. Litigation continued, but by the time the matter reached the U.S. Supreme Court the plaintiffs’ original case had been severely undermined by the proliferation of VCRs, making any legal restriction on copying television programs for private use nearly impossible to enforce.

During the mid 1970s, competitors, such as the American RCA and Zenith and the Japanese Toshiba and Victor Company of Japan (JVC), effectively adopted and improved upon technologies developed by Sony. For the first time, Sony began to lose significant market share, often in lines that it had pioneered. Strong competition, however, was only one factor that caused Sony’s sales growth to fall (after growing 166 percent between 1970 and 1974, it grew only 35 percent between 1974 and 1978).

Like many Sony officials, Akio Morita lacked formal management training. Instead, he relied on his personal persuasive skills and his unusual ability to anticipate or create markets for new products. In typical fashion, Sony introduced the Betamax VCR well before its competitors, in effect creating a market in which it would enjoy a short–term monopoly. At this stage, however, Morita failed to establish the Betamax format as the industry standard by inviting the participation of other companies.

Matsushita Electric (which owned half of JVC) developed a separate VCR format called VHS (video home system), which permitted as many as three additional hours of playing time on a tape, but which was incompatible with Sony’s Betamax. When the VHS was introduced in 1977, Morita was reported to have felt betrayed that Sony’s competitors did not adopt the Betamax format. He appealed to 81–year–old Konosuke Matsushita, in many ways a patriarch of Japanese industry, to discontinue the VHS format in favor of Betamax. When Matsushita refused, many believed it was because he felt insulted by Morita’s failure to offer earlier collaboration.

Matsushita launched a vigorous marketing campaign to convince customers and other manufacturers not only that VHS was superior, but that Betamax would soon be obsolete. The marketing war between Matsushita and Sony was neither constructive nor profitable; both companies were forced to lower prices so much that profits were greatly depressed. Although Betamax was generally considered a technically superior product, the VHS format grew in popularity and gradually displaced Betamax as a standard format. Despite its falling market share (from 13 percent in 1982 to five percent in 1987), Sony refused to introduce a VHS line until the late 1980s.

In 1979 Morita personally oversaw the development of a compact cassette tape player called the Walkman. Inspired by Norio Ohga’s desire to listen to music while walking, Morita ordered the development of a small, high–fidelity tape player, to be paired with small, lightweight headphones that were already under development. The entire program took only five months from start to finish, and the product’s success is now legendary—Walkman even became the generic term for similar devices produced by Sony’s competitors.

During the 1970s, Masaru Ibuka, 12 years Morita’s senior, gradually relinquished many of his duties to younger managers such as Norio Ohga, who was named president of Sony in 1982. Ohga became president shortly after a corporate reorganization that split Sony into five operating groups (marketing and sales, manufacturing, service, engineering, and diversified operations). While not formally trained in business, Ohga nonetheless understood that Sony was too dependent on an unstable consumer–electronics market. In one of his first acts, he inaugurated the 50–50 program to increase sales in institutional markets from 15 to 50 percent by 1990.

During this time, Sony’s research–and–development budget consumed approximately nine percent of sales (Matsushita budgeted only four percent). Another groundbreaking result of Sony’s commitment to research and development was a machine that used a laser to reproduce music recorded digitally on a small plastic disk. The compact disk (or CD) player eliminated much of the noise common to conventional, analog phonograph records. Sony developed the CD in association with the Dutch electronics firm Philips, partly in an effort to ensure broad format standardization. Philips, which had developed the
most advanced laser technology, was an ideal partner for Sony, which led in the pulse–code technology that made digital sound reproduction possible. Soon the CD format was adopted by competing manufacturers; by the mid–1990s it had virtually replaced phonograph systems as the recording medium of choice.

Early in the 1980s, Monta began ceding some of his duties to Sony’s president, Norio Ohga, the young opera student hired 30 years earlier to improve Sony’s tape recorders. Under Ohga, Sony entered into a new acquisitions phase with intent of protecting itself from the costly mistake it had made with Beta–max. One example of the changes Ohga brought about was Sony’s video camera, introduced in 1985. Lighter, less expensive, and more portable than VHS cameras, the camera used 8mm videotape, and was incompatible with both Betamax and VHS machines. The key difference between this and earlier Sony products was that Sony developed the new 8mm video format in conjunction with over 100 competitors. While the camera may have been incompatible with the older Betamax and VHS technologies, Sony ensured that it would be compatible with the next generation of video cameras. Within three years of its introduction, the camera captured over 50 percent of the European, 30 percent of the Japanese, and 20 percent of the North American markets.

In May 1984 Sony purchased Apple Computer’s hard–disk–technology operations. As a result of this acquisition, Sony was able to capture about 20 percent of the Japanese market for “work stations,” personal computers used in business offices, thus helping to increase the proportion of its sales derived from institutional customers. Ohga also broke a decades–old tradition in 1984 when he established a division to manufacture and market electronics components for other companies. By 1988, fueled by strong sales of semiconductors (once manufactured only for Sony products), the components division had grown to represent about 11 percent of Sony’s total sales.

Sony also sought to gain control of the software end of the electronics/entertainment industry. On November 29, 1985 the Sony Corporation of America, which operated several assembly plants in the United States, purchased the Digital Audio Disk Corporation from its affiliate CBS/Sony. Two years later, Sony purchased CBS Records for $2 billion. CBS Records, whose labels included Epic and Columbia, was during this time the largest producer of records and tapes in the world.

Sony had learned through its Betamax experience that a superior product alone wouldn’t ensure market dominance; had Sony been able to flood the market with exclusively Beta–formatted movies, the VCR battle might have turned out differently. Looking towards the future development of audio equipment, including digital audio tape (DAT), Sony bought the record manufacturer with an eye toward guaranteeing that the products it manufactured to play music would remain compatible with the medium used to record music. The acquisition marked less of a diversification for Sony than an evolution toward dominance in a specific market.

Sony sought further diversification in U.S. entertainment companies. In 1988, the company considered an acquisition of MGM/UA Communications Company, but decided the price was too high. Then in 1989 Sony made headlines around the world when it bought Columbia Pictures Entertainment from Coca–Cola for $3.4 billion. Columbia provided Sony with an extensive film library and strong U.S. distribution system. It also carried a $1 billion debt, which almost tripled Sony’s short–term debt to around 8 billion yen. Industry analysts applauded the move; however, when a recession hit the film industry shortly after Sony’s purchase, some began to question Sony’s ability to deliver its traditionally strong profits.

Sony did deliver, however, posting record earnings in 1990 of 58.2 billion yen ($384 million), a 38.5 percent increase over 1989. In 1992, Columbia Pictures and its subsidiary TriStar jointly captured 20 percent of the U.S. market share, far above the shares held by competing studios.

However, the complexities of operating a truly multinational corporation began taking their toll on Sony. Most of the world’s largest economies (Europe, Japan, and the United States) were experiencing a slowdown in the early 1990s. This factor created what Sony called “an unprecedentedly challenging operating environment.” Although sales in most of Sony’s businesses increased in 1992, operating income dropped 44 percent to 166 billion yen ($1.2 billion). Net income increased slightly to 120 billion yen.

The ongoing appreciation of yen against most major currencies had an even more adverse effect on Sony’s bottom line in 1993: net income fell a dramatic 70 percent to $36 billion yen ($313 million) on sales of 3,993 billion yen ($34.4 billion). Had the yen’s value held steady at 1992 figures, Sony’s net income would have totaled about 190 billion yen ($1.3 billion).

During that year, Ohga assumed the duties of chief executive in addition to his role as president. He and Morita responded to Sony’s tough economic situation by bolstering marketing, reducing inventory levels, streamlining operations, and keeping a watchful control of capital investments. The company also embarked on an extensive reorganization effort with the goal of decentralizing operations and reducing unnecessary management. Despite these measures, Sony was unable to stem the slide. Net income plummeted another 50 percent in 1994 to 15 billion yen, on sales of 3,734 billion yen.

By this time Morita had relinquished virtually all his duties in the company, having suffered a stroke in late 1993. In Sony’s 1994 annual report, his picture and signature were conspicuously absent from the letter to shareholders, implicitly announcing Ohga’s new leadership position. Under Morita’s leadership, Sony’s rise to preeminence in the world consumer–electronics market was almost entirely self–achieved; Sony outperformed not only its Japanese rivals, among them associates of the former zaibatsu (conglomerate) companies, but also larger American firms, which by 1995 had all but abandoned the consumer–electronics market.

In the late 1980s Morita told Business Week that he regarded the Sony Corporation as a “venture business” for the Morita family, which had produced several generations of mayors and whose primary business remained the 300–year–old Morita & Company. Under the direction of Akio Morita’s younger brother Kuzuaki, Morita & Company produced sake, soy sauce, and Ninohimatsu brand rice wine in Nagoya. The company,
whose initial $500 investment in TTK was worth $430 million in 1995, owned a 9.4 percent share of Sony.

In April 1995, Ohga ascended to the chairmanship of Sony, and Morita was made an honorary chairman. The company’s new president was Nobuyuki Idei, a 34–year veteran of the company, who had founded Sony’s French subsidiary in 1970 and had since played a role in many of the company’s major accomplishments, including audio CD technology, computer workstations, and the 8–mm video camcorder.

Sony’s success had been a direct result of the wisdom of its founders, who had the talent to anticipate the demands of consumers and to develop products to meet those demands; Idei’s presidency, some suggested, signalled a new era for the company.

Immediate among Idei’s concerns were helping Sony become an integral player in the information highway industry. He also hoped to help the company establish an industry standard for DVDs, or digital videodisks, larger CD–like disks containing full–length films for play on television screens via videodisk players, which were becoming increasingly popular among electronics buffs. According to one writer in Fortune magazine, Idei also sought to “reinforce the open–minded and cooperative ideals of Sony’s founders—which he calls Sony Spirit— company wide.”

The Sony Corporation is one of the best-known names in consumer electronics. Since it was established shortly after World War II, Sony has introduced a stream of revolutionary products, including the transistor radio, the Trinitron television, the Betamax VCR, and the Walkman portable cassette player.

Sony was founded by a former naval lieutenant named Akio Morita and a defense contractor named Masaru Ibuka. Morita, a weapons researcher, first met Ibuka during World War II while developing a heat-seeking missile-guidance system and a night-vision gun scope. After the war Ibuka worked as a radio repairman for a bomb-damaged Tokyo department store. Morita found him again when he read in a newspaper that Ibuka had invented a shortwave converter. In May of 1946 the two men established a partnership with $500 in borrowed capital, and registered their company as the Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering Corporation, or TTK). Morita and Ibuka moved their company to a crude facility on a hill in southern Tokyo, where they developed its first consumer product: a rice cooker, which failed commercially. In its first year TTK registered a profit of $300 on sales of less than $7,000.

But as the Japanese economy grew stronger, demand for consumer goods increased. Morita and Ibuka abandoned the home-appliance market and, with injections of capital from Morita’s father, concentrated on developing new electronic goods. Ibuka developed a tape recorder fashioned after an American model he had seen at the Japan Broadcasting Corporation. Demand for the machine remained low until Ibuka accidentally discovered a U.S. military booklet titled Nine Hundred and Ninety-Nine Uses of the Tape Recorder. Translated into Japanese, the booklet became an effective marketing tool. Once acquainted with its many uses, customers such as the Academy of Art in Tokyo purchased so many tape recorders that TTK was soon forced to move to a larger building in Shinagawa.

Norio Ohga, a student at the academy, wrote several letters to TTK criticizing the sound quality of its recorder. Impressed by the detail and constructive tone of the criticisms, Morita invited Ohga to participate in the development of a new recorder as a consultant. Ohga accepted, and subsequent models were vastly improved.

Constantly searching for new technological advances, Masaru Ibuka heard of a tiny new capacitor called a transistor in 1952. The transistor, developed by Bell Laboratories, could be used in place of larger, less-durable vacuum tubes. Western Electric purchased the technology in order to manufacture transistorized hearing aids. Ibuka acquired a patent license from Western Electric for $25,000 with the intention of developing a small tubeless radio.

TTK began mass production of transistor radios in 1954, only a few months after they were introduced by a small American firm called Regency Electronics. The TTK radio was named. Sony, from sonus, Latin for “sound.” The Sony radio had tremendous sales potential, not only in the limited Japanese market, but also in the United States, whose economy was much stronger.

Traditionally, international sales by Japanese companies were conducted through trading houses such as Mitsui, Mitsubishi, and Sumitomo. Although these trading companies were well represented in the United States, Morita chose not to do business with them because they were unfamiliar with his company’s products and did not share his business philosophy. Morita traveled to New York, where he met with representatives from several large retail firms. Morita refused an order from Bulova for 100,000 radios when that company required that each carry the Bulova name. Morita pledged that his company would not manufacture products for other companies and eventually secured a number of more modest orders that assured his company’s growth at a measured pace.

The rising popularity of the Sony name led Morita and Ibuka to change the name of their company to Sony Kabushiki Kaisha (Corporation) in January of 1958. The following year Sony announced that it had developed a transistorized television. In 1960, after a business dispute with Delmonico International, the company Morita had appointed to handle international sales, Sony established a trade office in New York City and another in Switzerland called Sony Overseas.

A subsidiary called Sony Chemicals was created in 1962 to produce adhesives and plastics to reduce the company’s dependence on outside suppliers. And in 1965 a joint venture with Tektronix was established to produce oscilloscopes in Japan.

During the early 1960s Sony engineers continued to introduce new, miniaturized products based on the transistor, including an AM/FM radio and a videotape recorder. By 1968 Sony engineers had developed new color-television technology. Using one electron gun, for more-accurate beam alignment, and one lens, for better focus, the Sony Trinitron produced a clearer image than conventional three-gun, three-lens sets. In what has been described as its biggest gamble, Sony, confident that technology alone would create new markets, invested a large amount of capital in the Trinitron.

Also in 1968, Sony Overseas established a trading office in England, and entered into a joint venture with CBS to produce phonograph records. The venture was under the direction of Norio Ohga, the art student who had complained about Sony’s early tape recorder, whom Morita had persuaded in 1959 to give up opera and join Sony. The company, called CBS/Sony, later became the largest record manufacturer in Japan. In 1970 Sony Overseas established a subsidiary in West Germany to handle sales in that country.

After a decade of experience in videotape technology, Sony introduced the U-matic three-quarter-inch videocassette recorder (VCR) in 1971. Intended for institutions such as television stations, the U-matic received an Emmy Award for engineering excellence from the National Academy of Television Arts and Sciences. In 1973, the year Sony Overseas created a French subsidiary, the academy honored the Trinitron series with another Emmy.

Sony developed its first VCR for the consumer market, the Betamax, in 1975. The following year the Walt Disney Company and Universal Pictures filed a lawsuit against Sony, complaining that the new machine would enable widespread copyright infringement of television programs. A judgment in favor of Sony in 1979 was reversed two years later. Litigation continued, but by the time the matter reached the U.S. Supreme Court the plaintiffs’ original case had been severely undermined by the proliferation of VCRs, making any legal restriction on copying television programs for private use nearly impossible to enforce.

During the mid 1970s, competitors, such as the American RCA and Zenith and the Japanese Toshiba and Victor Company of Japan (JVC), effectively adopted and improved upon technologies developed by Sony. For the first time, Sony began to lose significant market share, often in lines that it had pioneered. Strong competition, however, was only one factor that caused Sony’s sales growth to fall (after growing 166% between 1970 and 1974, it grew only 35% between 1974 and 1978).

Like many Sony officials, Akio Morita lacked formal management training. Instead, he relied on his personal persuasive skills and his unusual ability to anticipate or create markets for new products. In typical fashion, Sony introduced the Betamax VCR well before its competitors, in effect creating a market in which it would enjoy a shortterm monopoly. At this stage, however, Morita failed to establish the Betamax format as the industry standard by inviting the participation of other companies.

Matsushita Electric (which owns half of JVC) developed a separate VCR format called VHS (video home system), which permitted as many as three additional hours of playing time on a tape, but which was incompatible with Sony’s Betamax. When the VHS was introduced in 1977, Morita was reported to have felt betrayed that Sony’s competitors did not adopt the Betamax format. He appealed to 81-year-old Konosuke Matsushita, in many ways a patriarch of Japanese industry, to discontinue the VHS format in favor of Betamax. When Matsushita refused, many believed it was because he felt insulted by Morita’s failure to offer earlier collaboration.

Matsushita launched a vigorous marketing campaign to convince customers and other manufacturers not only that VHS was superior, but that Betamax would soon be obsolete. The marketing war between Matsushita and Sony was neither constructive nor profitable; both companies were forced to lower prices so much that profits were greatly depressed. Although Betamax was generally considered a technically superior product, the VHS format grew in popularity and gradually displaced Betamax as a standard format. Despite its falling market share (from 13% in 1982 to 5% in 1987), Sony refused to introduce a VHS line until the late 1980s.

In 1979 Morita personally oversaw the development of a compact cassette tape player called the Walkman. Inspired by Norio Ohga’s desire to listen to music while walking, Morita ordered the development of a small, high-fidelity tape player, to be paired with small, lightweight headphones that were already under development. The entire program took only five months from start to finish, and the product’s success is now legendary—Walkman even became the generic term for similar devices produced by Sony’s competitors.

During the 1970s, Masaru Ibuka, 12 years Morita’s senior, gradually relinquished many of his duties to younger managers such as Norio Ohga, who was named president of Sony in 1982. Ohga became president shortly after a corporate reorganization that split Sony into five operating groups (marketing and sales, manufacturing, service, engineering, and diversified operations). While not classically trained in business, Ohga nonetheless understood that Sony was too dependent on an unstable consumer-electronics market. In one of his first acts, he inaugurated the 50-50 program to increase sales in institutional markets from 15% to 50% by 1990.

Sony’s research-and-development budget consumes approximately 9% of sales (Matsushita budgets only 4%). Another groundbreaking result of Sony’s commitment to research and development was a machine that uses a laser to reproduce music recorded digitally on a small plastic disk. The compact disk (or CD) player eliminates much of the noise common to conventional, analog phonograph records. Sony developed the CD in association with the Dutch electronics firm Philips, partly in an effort to ensure broad format standardization. Philips, which had developed the most advanced laser technology, was an ideal partner for Sony, which led in the pulse-code technology that makes digital sound reproduction possible. The CD format has been adopted by competing manufacturers, and is expected largely to replace phonograph systems by the mid-1990s.

In addition to the CD player, Sony has introduced a new video camera that is lighter, less expensive, and more portable than VHS cameras, but that uses 8mm videotape, and is therefore incompatible with both Betamax and VHS machines. The 8mm video system has also been developed by competitors such as Fuji, Canon, Kodak, and Pioneer, on the premise that it will gain wider acceptance by tourists as a convenient travel camera.

In May, 1984 Sony purchased Apple Computer’s hard-disk-technology operations. Hard disks store more information and are more durable than floppy disks, and are a very popular computer storage medium. As a result of this acquisition, Sony may be better placed to introduce a line of personal-computer systems for business, thus helping to increase the proportion of its sales derived from institutional customers.

On November 29, 1985 the Sony Corporation of America, which operates several assembly plants in the United States, purchased the Digital Audio Disk Corporation from its affiliate CBS/Sony. Two years later, Sony purchased CBS Records for $2 billion. CBS Records, whose labels include Epic and Columbia, is the largest producer of records and tapes in the world.

Sony’s motivation for the somewhat expensive purchase was the coupling of its own hardware expertise with CBS Records’ premium “software” talent. Sony had learned through its Betamax experience that a superior product alone doesn’t insure market dominance—had Sony been able to flood the market with exclusively Beta-formatted movies, the VCR battle might have turned out differently. Looking towards the future development of audio equipment, including digital audio tape (DAT), Sony bought the record manufacturer with an eye toward guaranteeing compatible “software” in whatever new formats it developed. The acquisition marked less of a diversification for Sony than an evolution toward dominance in a specific market.

Sony sought further diversification in U.S. entertainment companies. In 1988, the company considered an acquisition of MGM/UA Communications Corporation, but decided the price was too high. Then in 1989 Sony made headlines around the world when it bought Columbia Pictures Entertainment Group from Coca-Cola for $3.4 billion.

In the late 1980s, Sony also pushed hard for the introduction of high-definition television (HDTV) to consumer markets, and hoped to market the new product by the early 1990s.

Sony maintains a number of joint ventures, including one with Union Carbide to manufacture Eveready batteries in Japan. Sony also operates a life-insurance company in association with the Prudential Life Insurance Corporation and, with Pepsico, runs a company that imports and markets Wilson sports equipment. Sony has also established a joint venture with the Chinese government to produce television sets in the People’s Republic of China.

Akio Morita told Business Week that he regards the Sony Corporation as only a “venture business” for the Morita family, which has produced several generations of mayors and whose primary business remains the 300-year-old Morita & Company. Under the direction of Akio Morita’s younger brother Kuzuaki, Morita & Company produces sake, soy sauce, and Ninohimatsu brand rice wine in Nagoya. The company, whose initial $500 investment in TTK is now worth $430 million, owns a 9.4% share of Sony.

Sony’s rise to preeminence in the world consumer-electronics market is almost entirely self-achieved; Sony has outperformed not only its Japanese rivals, among them associates of the former zaibatsu (conglomerate) companies, but also larger American firms, which today have all but abandoned the consumer-electronics market. The company’s success is a direct result of the wisdom of its founders, who had the talent to anticipate the demands of consumers and to develop products to meet those demands.

Sony Corporation

Gale Encyclopedia of U.S. Economic History
COPYRIGHT 2000 The Gale Group Inc.

SONY CORPORATION

Since its post-World War II (1939–1945) founding in Japan, the Sony Corporation revolutionized the consumer electronics field. The Sony name became familiar throughout the world for such innovative products as the transistor radio, the Trinitron television, the Walkman cassette player, and the compact disk (CD). The company also joined in other diversified industries such as entertainment, battery manufacture, life insurance, and sports equipment. By the end of the twentieth century it cooperated with the People's Republic of China to produce television sets. Sony had become a major player on the international market.

After the devastation of World War II Japan was ripe for all kinds of business developments which would bring the country back to normal life, but at the same time, revolutionize its business practices and institutions. In 1946, with borrowed capital, Akio Morita and Masuri Ibuka set up the company known as Tokyo Tsushin Kogyo (Tokyo Telecommunications Engineering Corporation), the forerunner of Sony. They first developed a rice cooker, which was a failure, but they soon succeeded with a tape recorder. When Norio Ohga, a student of opera, wrote to complain about the tape recorder's sound quality, Morita and Ibuka invited him to present his critiques in person and later asked him to join the company, and he eventually became president and chairman.

In 1952 the two directors first heard of a tiny new capacitor called a transistor, which had been developed by Bell Laboratories and used by Western Electric to manufacture hearing aids. Ibuka obtained a patent license to begin producing the first transistor radios in 1954. They named the radio "Sony," after the Latin word for "sound" and the word "sonny," or little son. Prior to the Sony transistor radio portable radios were fairly large because of their vacuum tubes. Consumers were amazed at the compactness of Sony radios and were eager to buy them.

To market his product in the United States, Morita himself traveled to New York to meet with representatives of several large retail businesses. In 1958 Morita and Ibuka decided to change the whole name of the company to Sony Kabushiki Kaisha (Corporation). Within a year the company had developed a transistorized television.

Sony began to expand rapidly, establishing trade offices in Switzerland, the U.S., and England. A subsidiary was also set up to provide the adhesives and plastics needed for manufacturing. Other transistorized products were also developed such as the AM/FM radio and a videotape recorder. Sony's biggest gamble during the 1960s was the Trinitron television, which, at the time, used the most advanced color technology. Norio Ohga also headed a new venture called CBS/Sony, which became the largest manufacturer of phonograph records in Japan.

In the 1970s Sony was the pioneer in the development of Betamax video-cassette recorders (VCRs), yet by the end of the decade the Beta format had been superseded by the video home system (VHS) format introduced by Sony's competitors. A market war ensued between Sony and manufacturers of VHS systems—Sony refused to market a VHS line until the late 1980s and began to lose market share.

A more successful venture at Sony was the introduction of the Walkman compact cassette player in 1979. By using a small player and lightweight headphones a person was able to enjoy music while walking. The term "Walkman" soon became the generic name for similar products produced by Sony's competitors.

Norio Ohga became president of Sony in 1982 after Ibuka and Morita had begun to cut down on their duties. Ohga reached out to institutional markets as well as to individual consumers; he also focused attention on research and development. In partnership with the Dutch firm Phillips, Sony developed the first laser disk recorder, or compact disk (CD), which greatly improved sound quality. By the 1990s the CD format used by Sony and several competitors had virtually eliminated old phonograph systems.

From its bitter experience with the Beta-VHS conflict Sony officials had learned that a superior product alone would not guarantee sales. When the company developed a lightweight video camera in 1985 it did so in conjunction with over 100 competitors to ensure that future cameras would be compatible with its 8mm format. Sony also bought a company which manufactured the new digital audio tape (DAT), with hopes to ensure future compatibility among recording systems. Sony also sought to increase its institutional sales and to continue to diversify. It purchased Apple Computer's hard-disk technology operations, the Digital Audio Disk Corporation, CBS Records, and Columbia Pictures Entertainment. In 1990 Sony posted a 38.5 increase in earnings over 1989.

Like many other companies in the global economy Sony experienced a downturn in the 1990s. Appreciation in the value of the Japanese yen adversely affected the company's export sales in the mid-1990s. In 1995 Morita relinquished his chairmanship in favor of Ohga, and Nobuyuki Idei was named president. Despite setbacks the Morita era had led to Sony's great success. Sony occupied a pre-eminent place in a worldwide, consumer electronics industry—the company had 173,000 employees and annual sales of $51.2 billion in 1998. Morita had been the most visible spokesman for the company, as well as an effective purveyor of ideas. He created the Sony name and several of the product names—Walkman, Handycam, and Watchman. Under his leadership Sony engineers developed an astounding array of revolutionary electronic products which are now accepted as everyday necessities.

In 1998 Sony Electronics Inc. (SEL), the largest component of Sony America, became an independent company. Its president, Teruaki Aoki (responsible for Sony's entry into the digital video disk (DVD) market), told Electronic Engineering Times that SEL would be "an autonomous company now serving as a good partner for Sony Corporation." In the late 1990s Sony also began marketing an interactive video game console called PlayStation (and later PlayStation II), whose major competitor was the Sega Dreamcast system. In creating these practical luxuries the Sony Corporation has made their products essential to daily life as well as erasing the negative image once attached to products wearing the label "Made in Japan."